Auction results points to strong future for DSR

Blog

Posted on: 29/01/2016

The Government introduced Transitional Arrangements auctions as a way of encouraging greater take-up of Demand Side Response services. SmartestEnergy’s Rob Owens believes the outcome of the first one this week will play an important role in achieving that goal.

Waiting for the results of an auction always tends to generate a bit of excitement and for those in the energy industry this week’s Transitional Arrangements round was no exception.

Unlike the Capacity Market auction, which saw its second round staged recently, this latest auction was specifically aimed at provision of Demand Side Response (DSR) to encourage more energy users to get involved in this rapidly developing area.

Just over 800MW of electricity capacity was secured for winter 2016/17 at a clearing price of £27.50MW, a significantly higher level than the market had been expecting.

Although rather more low-key than the Capacity Market auction it supports, the outcome was good news for businesses looking to get involved in DSR.

The capacity secured was relatively small compared to the 46GW achieved under the main auction, but the result will play an important role in providing confidence for the future for DSR.

With expectations for clearing prices in these capacity auctions to rise in the years ahead, the price achieved this week sends a strong signal of support.

The Government hopes that these transitional auctions will also provide valuable experience about the bidding process to help providers get in a better position to take part in the main Capacity Market auctions.

We have seen growing interest in DSR among our customers given the potential financial gains from taking part - even if not called on to respond - as well as other benefits from playing an active role in helping support the grid and avoid blackouts.

Having successfully participated in this transitional auction ourselves after launching our own SmartDSR service towards the end of last year, we will now be working with our customers to help them make the most of the opportunity.

The outcome of the first of these auctions has provided a strong platform for DSR to achieve its full potential in benefitting businesses and helping meet the UK’s future energy needs.